POST PRESSES GOS ON IRAN FINANCIAL ISSUES

C O N F I D E N T I A L SECTION 01 OF 02 MADRID 000465

SIPDIS

SIPDIS

STATE FOR EEB/ESC, ISN/CPI, T, EUR, NEA, STATE PASS
TREASURY FOR IA/OEE WLINDQUIST

E.O. 12958: DECL: 04/23/2018
TAGS: ECON EFIN ETRD EINV KNNP PREL PGOV MNUC IR SP
SUBJECT: POST PRESSES GOS ON IRAN FINANCIAL ISSUES

REF: (A) NEMROFF-SCHONANDER ET. AL 4/21/08 E-MAIL (B)
MADRID 00366 (C) 07 MADRID 01480 (D) 07
MADRID 00860 (E) 07 MADRID 00769 (F) 07
MADRID 641 (G) 07 MADRID 607 (H) 07 MADRID
00602 (I) 07 MADRID 00468 (J) 07 MADRID 00270

Classified By: Deputy Chief of Mission Hugo Llorens for reasons 1.4(b)
and 1.4 (d)


1. (C) Summary: The Ambassador pressed the head of Spain's
Export Credit Insurance Company (CESCE) on 4/21/08 to limit
export credit guarantees to Iran. Separately, EconOff met on
4/21/08 with a Ministry of Foreign Affairs (MFA) official to
discuss Spain's views on Iran sanctions. The MFA official
explained that Spain will continue to implement United
Nations Security Council Resolutions (UNSCRs) on Iran, and
that Spain intends to be in the "main current" of EU
sanctions policy on Iran. However, Spain would also take
into account its economic/commercial interests in Iran,
especially in the oil and gas sector, and would insist on
equitable treatment for its companies. End Summary

AMBASSADOR'S MEETING WITH
CESCE HEAD
--------------

2.(C) The Ambassador met with CESCE Director General Joaquin
de la Herran. His company issues export credit insurance for
Spanish exporters. The GOS is the majority shareholder in
CESCE, with BBVA, Banco Santander and 41 other institutions
owning the rest of the company. The actual loans are usually
provided by major Spanish banks such as BBVA and Santander.
The Ambassador pointed out that in terms of stock, CESCE's
insurance policies for exports to Iran are the third largest
with roughly euros 750 million in outstanding export credit
insurance guarantees at the end of 2006. (Note: Again, this
refers to the stock of outstanding export credit insurance
policies. Annual Spanish exports to Iran are comparatively
modest. In 2007, Spain exported euros 354 million to Iran,
which represented 0.23 percent of Spain's exports to the
world. In 2007, Spain imported about euros 1.2 billion from
Iran, mostly petroleum products.) The Ambassador stressed
that exports to Iran should be scrutinized carefully, and
that credit guarantees should be issued sparingly.

MEETING WITH MFA OFFICIAL
--------------


3. (C) EconOff met with Subdirector General for Bilateral
Economic Relations with Developing Countries Alejandro
Alvargonzalez San Martin to discuss Spain's views on Iran
financial sanctions. Alvargonzalez' views track broadly with
the positions that Spain reportedly took at the 4/18/08 EU
Political and Security Committee meeting (ref A). Spain has
no objection to moving on the pending EU autonomous
designations list. Spain also accepts and implements
sanctions on Bank Melli and Bank Saderat. Alvargonzalez said
that Bank Melli had initially been a problem for Spain as
Spanish exporters had traditionally used Bank Melli for
monetary transfers (not loans). Although ref A reports that
Spain argued against new measures at the April 18 meeting,
Alvaronzalez said that Spain would consider new sanctions on
their merits. Alvargonzalez explained that Spain "could
accept a lower level" of export credits for Iran, but that
given Spain's relatively low level of exports to Iran
(compared with other EU countries),it could not accept
proportional cuts in export credits. He indicated that
Spanish companies needed a floor level of business with Iran
in order to be competitive for the day when economic
relations with Iran are normalized. Alvargonzalez added that
sanctions in the oil and gas sector were not acceptable to
Spain. He said that Spain's major economic/commercial
interest in Iran is Repsol's possible investment in the South
Pars gas field.

COMMENT
--------------


4. (C) Ambassador will meet with the new Minister of
Industry, Tourism and Trade on 4/24/08 and will reinforce our
message on Iran. Ambassador and EmbOffs will continue to
press for stronger action on Iran with MFA, CESCE (and CESCE
shareholders) and other officials as well. Last year, the
Ambassador met with Repsol CEO Antonio Brufau (ref J) to
discuss Repsol's possible Iran investment. At that meeting,
Brufau told the Ambassador that a final investment decision

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would not be made by Repsol until the third quarter of 2008.
The Embassy will seek opportunities to continue discourage
Repsol from investing in Iran's oil and gas sector.

AGUIRRE